For the first time in more than 20 years, Fannie Mae and Freddie Mac (the GSEs) have redesigned the Uniform Residential Loan Application (URLA), also known as the 1003 loan application and the 65 loan application, respectively.
The purpose behind the redesign is multifold. The GSEs’ stated main objectives were to:
- Update the URLA to collect information that is relevant and useful to the industry and provides lenders the information needed to make an underwriting decision;
- Redesign the format and layout of the URLA to make it more consumer friendly, enhance collection, and improve usability; and
- Define a MISMO compliant dataset that supports the URLA (this will be known as ULAD – Uniform Loan Application Dataset).
What should originators know about the new FNMA 1003 loan application?
- Loan officers will have the option to begin using the new URLA as of 1 January 2017.
- The redesigned URLA will become required sometime thereafter. There is no announced timetable for requirement at this point
- The CFPB will be requiring expanded HMDA Demographic data collection, also as of 1 January 2018. The redesigned URLA includes these additional data fields.
- Lenders who have yet to transition to the redesigned URLA as of 1 January 2018 will be required to use a Demographic Information Addendum to the current URLA. This addendum will replace Section X on the current URLA (the section will need to be crossed-out or deleted).
What are the benefits of using the redesigned URLA?
As mentioned above, loan officers will first have the option to transition to the redesigned 1003 loan application, before they will be required to use it. There are benefits to making the transition early:
- Meet the CFPB’s HMDA Demographic data collection requirement without needing to incorporate an addendum
- Flexible format – not all loan apps are the same
- Streamlined application – eliminated fields no longer necessary for underwriting; easier to read and complete format; simplified process to add or remove someone from a loan app
- Easier for borrower’s to complete with minimal assistance
- Make sure you and your team are comfortable with the new form, before it’s required
With all of the new initiatives and regulations that the industry is still adjusting to, the new URLA will have to wait until 1 January 2017 at the earliest. Sometime thereafter, the use of the form will become required, but there are some good benefits for loan officers to consider transitioning to the redesigned URLA as soon as it becomes optional.